House of Representatives Committees

Chapter 1 Introduction

Background

1.1On 7 July 2011, the Selection Committee referred the Food Standards
Amendment (Truth in Labelling—Palm Oil) Bill 2011 to the committee for inquiry
and report.

1.2The Bill was reported in the House of Representatives as being received
from the Senate, and read a first time, on 4 July 2011.

1.3A previous version of the Bill, the Food Standards Amendment (Truth in
Labelling-Palm Oil) Bill 2009, was referred to the Senate Community Affairs
Legislation Committee for inquiry and report, with a report date of August
2010. The Senate inquiry lapsed at the prorogation of the 42nd
Parliament on 19 July. After the 2010 election, the Bill was reintroduced and
the Senate recommenced the inquiry with the Senate committee reporting in June
2011. The Senate amended and passed the Bill after the committee report was
tabled.

Purpose and overview of the Bill

1.4The stated purpose of the Bill is to provide for the labelling of palm
oil in food and other products.

1.5This Bill’s intention is to give consumers information to allow them to
make an informed choice about whether they want to purchase or consume a
product containing palm oil.

1.6The Bill amends the Food Standards Australia New Zealand Act 1991 to require Food Standards Australia New Zealand (FSANZ) to develop and
approve labelling standards to be used by food producers, manufacturers and distributors
of food containing palm oil. It also seeks to amend the Competition and
Consumer Act 2010 to include the use of palm oil in the characteristics of
any goods for the purposes of misleading conduct as to the nature of goods.

1.7In relation to food labelling, the key provision of the Bill is that:

The Authority must, within 6 months after the commencement of
this section, develop and approve labelling standards that prescribe that
producers, manufacturers and distributors of food containing palm oil,
regardless of the amount of palm oil used in the food or used to produce the
food, must list palm oil as an ingredient of the food.

1.8In relation to the Australian Consumer Law, the key provision of the
Bill is to insert the following into the misleading conduct offence:

For the purposes of subsection (1) [the misleading conduct
offence], the characteristics of any goods include the use of palm oil in the
goods or to produce the goods.

Legislation that the Bill seeks to amend

The Australian food standards regime

1.9The Australian food regulatory system is a shared undertaking between
the Commonwealth and States and Territories. To operate, the system requires
multiparty negotiation and consultation between these governments. Further,
Australian food standards are also, as a matter of principle, coordinated with
New Zealand.

1.10The system separates policy decision making from the detailed task of
developing food standards. The Australia and New Zealand Food Regulation Ministerial
Council (the Ministerial Council) is responsible for food regulation policy in
Australia and New Zealand, while an independent agency (FSANZ) develops food
standards and administers the Australia New Zealand Food Standards Code.

1.11The system draws its authority from three separate legal instruments:

nthe Food Standards Australia New Zealand Act 1991
(the FSANZ Act) which establishes the Food Standards Australia New
Zealand (FSANZ) as the regulatory authority for food;

nthe Food Regulation Agreement, to which the
Commonwealth, State and Territory governments are parties; this
establishes a regulatory framework for food that would be consistent across all
Australian States and Territories, as well as establishing the Australia and New Zealand Food Regulation
Ministerial Council (the Council), which provides oversight of the food
regulatory system; and

nthe Australia New Zealand Joint Food Standards Treaty
which establishes a system of joint food
standards to operate across both nations.

1.12Food standards are developed by FSANZ following Council policy
and the FSANZ Act. They are spelt out in the Australia New Zealand Food
Standards Code (the Code) whose legal authority is provided by State, Territory
and New Zealand legislation.[1]

1.13The purpose of FASNZ is set out as follows in the FSANZ Act, section 18:

(b) the
provision of adequate information relating to food to enable consumers to make
informed choices; and

(c) the prevention of misleading
or deceptive conduct.

1.14Though ownership of the system is shared, compliance is left to the State
and Territory health departments which enforce the Code.

Australian consumer law (ACL)

1.15The cooperative approach to food standards also applies to consumer law.
In October 2008, the Council of Australian Governments (COAG) agreed to a new
national consumer policy framework which was intended to enhance consumer
protection, reduce regulatory complexity for businesses and encourage the
development of a seamless national economy.[2]

1.16The ACL was intended to support COAG’s National Partnership Agreement
to Deliver a Seamless National Economy, which aimed at reducing regulatory
duplication and inconsistency. To do this, the ACL replaces specific provisions
in at least 20 overlapping laws at both the Commonwealth and State and Territory
level.[3] Any changes to the ACL by
the Commonwealth, for example, would require that the States and Territories
also amend their various laws to maintain the national consistency of the
system. Importantly, the Agreement states: ‘This Agreement may be amended only
by the unanimous agreement of all the Parties’.[4]

1.17The purpose of this policy framework for consumer protection is to
improve consumer wellbeing through empowerment and protection, to foster
competition and to enable the confident participation of consumers in markets
in which both consumers and suppliers alike trade fairly. This purpose is in
turn supported by six operational objectives:

nto ensure that
consumers are sufficiently well‐informed
to benefit from and stimulate effective competition;

nto ensure that goods
and services are safe and fit for the purposes for which they were sold;

nto prevent practices
that are unfair;

nto meet the needs of
those consumers who are most vulnerable or are at the greatest disadvantage;

nto provide accessible
and timely redress where consumer detriment has occurred; and

nto promote
proportionate, risk‐based
enforcement.

1.18The Australian Consumer Law took effect in January 2011. It is too soon
to quantify its benefits, but the Productivity Commission estimated that
Australian consumers and businesses will obtain benefits of up to
$4.5 billion per annum. These benefits will accrue by increasing the
capacity of consumers to make informed decisions, reduced compliance costs for
business, enhanced productivity and innovation and reduced transaction costs.[5]

Developments prior to the Bill

Labelling Logic: Review of Food Labelling: Law and Policy (2011)

1.19Separately to the Bill, the Australia
and New Zealand Food Regulation Ministerial Council (the Ministerial Council or
MINCO) will respond to the recommendations of the review on 9 December 2011. In particular, it will consider a
whole of Commonwealth, State, Territory and New Zealand Government response to
the report, which the Department of Health and Ageing is currently coordinating.

1.20In October 2009, the MINCO announced a Review of Food Labelling Law and
Policy. An independent expert panel, chaired by former Australian Health
Minister Dr Neal Blewett AC, was appointed to conduct the review. He was
joined on the panel by professionals with backgrounds in food industry
communications, marketing and corporate affairs, consumer behaviour and food
and nutrition policy.

1.21The terms of reference of the review required that the panel:

nexamine the policy
drivers impacting on demands for food labelling;

nconsider what should
be the role for government in the regulation of food labelling and what
principles should guide decisions about government regulatory intervention;

nconsider what
policies and mechanisms are needed to ensure that government plays its optimum
role;

nconsider principles
and approaches to achieve compliance with labelling requirements and
appropriate and consistent enforcement;

nevaluate current
policies, standards and laws relevant to food labelling and existing work on
health claims and front-of-pack labelling against terms of reference 1–4 above;
and

nmake recommendations
to improve food labelling law and policy.

1.22The review received approximately 6,600 submissions and heard from
approximately 550 attendees at public consultation sessions.

1.23The review wrote up its findings in its report, Labelling Logic:
Review of Food Labelling: Law and Policy (2011) and made 61
recommendations. The most important for present purposes are:

Recommendation 2: That food labelling policy be guided
by an issues hierarchy in descending order of food safety, preventative health,
new technologies and consumer values issues. Regulatory action in relation to
food safety, preventative health and new technologies should primarily be
initiated by government and referenced in the Food Standards Code. Regulatory
action in relation to consumer values issues should generally be initiated by
industry and referenced to consumer protection legislation, with the
possibility of some specific methods or processes of production being referenced
in the Food Standards Code.

1.24The Department of Health and Ageing is coordinating the Government’s
response to the Labelling Logic review of food labelling, which is
expected to be considered by the Ministerial Council on 9 December 2011.

Senate inquiry

1.25The Senate committee reported on an earlier version of the Bill. The
differences between the two versions of the Bill are:

nthe earlier Bill had
a second purpose of encouraging the use of certified sustainable palm oil to
help protect wildlife habitat;

nthe earlier Bill
prescribed the labelling of palm oil if it had been certified as sustainable in
accordance with regulations; and

nthe earlier Bill did
not seek to amend the Australian Consumer Law.

1.26The Senate committee made the following specific recommendations:

nFSANZ consider whether paragraph 18(1)(b) [stipulating that one of the authority’s objectives is to help
consumers make informed choices] should be read independently of paragraph
18(1)(a) of its Act [requiring the authority to protect public health and
safety] in assessments of food labelling applications.

nIn the case of palm
oil labelling, that evidence placed before this committee be taken by FSANZ as one indication that a cost-benefit analysis may identify significant community
benefits that would be gained from the provision of sought-after food labelling
information, while possibly involving limited costs.

nThe government fully
consider Recommendation 12 of the Review of Food Labelling Law and Policy
(2011).

1.27The Senate committee recommended that the Bill not be passed. In
particular, the Senate committee noted that only FSANZ could reach an
appropriate judgement. The committee also observed that the level of community
interests indicated that there are potentially significant benefits to
labelling palm oil. The Senate committee concluded that voluntary actions were
preferable to those in the Bill.

1.28The committee minority report recommended that the Bill be passed to
support consumers’ right to know what they are eating and to protect the
habitat of orangutans.

1.29After the committee report was tabled, the Senate amended the Bill. The
amendments were:

nto remove the
reference to sustainable palm oil so that all palm oil would be required to be
labelled. This was done due to concerns expressed in the Senate about the difficulty
of ascertaining whether the palm oil in a product was produced from a
sustainable source;

nto include a
requirement that the Australian Consumer Law (ACL) specifically cover palm oil
as a characteristic of a product. This was done to ensure that the ACL covered
palm oil and was only to apply to products manufactured 12 months after the
commencement of this provision to give an implementation period for producers;
and

nto remove one of the purposes
of the Bill, which related to certified sustainable palm oil, and to broaden
the consumer information purpose to apply to palm oil in goods, not just foods.
This was done to ensure consistency with the other amendments.[6]

The story of palm oil

1.30Global demand for palm oil has increased dramatically over the past four
decades. The World Bank reports that world demand for palm oil was
approximately 2 million tonnes in 1970 and in 2010 grew to over 50 million
tonnes.[7]

1.31The reason for this growth is that palm oil has considerable advantages
for both its producers and its end-users. The palm oil plant is very
high-yielding. The Malaysian Ministry of Plantation Industries and Commodities
advised the committee that the palm oil plant has an average yield of 4.1
tonnes per hectare per year. This is much higher than other vegetable oil
crops. For example, rapeseed and sunflower plants yield 0.75 and 0.5 tonnes per
hectare per year respectively.[8] The Australian Institute
of Horticulture advised that, unlike many other oil crops, the oil palm can
grow on natural rainfall and does not require intensive irrigation or
cultivation.[9]

1.32Palm oil is also very attractive to the food industry. Professor
Sinclair of Deakin University advised the committee that it is a low cost oil
that is solid at room temperature. This latter property is important because it
prevents the oil leaking out of food over time. The two types of oils that have
this property are trans fatty acids and saturated fats. Trans fatty acids have
been commonly used in the United States where surplus soya bean oil was
partially hydrogenated to make it more solid at room temperature. Australia has
traditionally used saturated fats such as pig fat (lard) and beef fat (tallow),
but palm oil is now much more common.[10]

Conduct and scope of the inquiry

1.33The objective of the inquiry is to scrutinise the technical adequacy of
the Bill and its ability to deliver the policy intent.

1.34This inquiry followed an inquiry by the Senate Community Affairs
Legislation Committee into the Food Standards Amendment (Truth in
Labelling—Palm Oil) Bill 2010. The Bill that the Senate committee examined was
similar to the Bill in the current inquiry and the Senate committee received
over 500 submissions. In order to conduct the inquiry at the least
inconvenience to the public, the committee agreed that it would take into
account the submissions made to the Senate committee for this inquiry. Organisations
and individuals could make additional submissions if they so wished.

1.35Details of the inquiry were placed on the committee’s website. A media
release announcing the inquiry and seeking submissions was issued on Wednesday,
3 August 2011. Advertisements for the inquiry were placed in the Australian
on Friday, 5 August 2011 and Thursday, 11 August 2011.

1.36Thirty-seven submissions and two supplementary submission were received and
are listed at Appendix A. Seven exhibits were received which are listed at
Appendix C.